News Transcript

Remarks by Agriculture Secretary Vilsack and Energy Secretary Chu on USDA and DOE Biomass Research and Development Grants to Reduce America's Reliance on Imported Oil

May 5, 2011

MODERATOR: I want to thank you for joining us for today's media briefing. On the line, we have Agriculture Secretary Tom Vilsack and Energy Secretary Steven Chu. They will be discussing efforts to reduce U.S. oil dependence, and they'll also be announcing Biomass Research and Development grants in several places around the country, and with that, I turn it over to Agriculture Secretary Vilsack.

SECRETARYVILSACK: Susan, thank you very much, and I want to thank my colleague, Secretary Chu, for joining us as well. Both Steve Chu and I know, as the President, that American families and businesses are feeling the impact of higher gasoline prices, and I think it's fair to say the President understands that something has to be done now and over the long haul to break our nation's unsustainable dependence on foreign oil and move towards the clean energy economy that the President speaks of.

Unfortunately, there's no silver bullet to addressing rising gas prices in the short term, but there are steps that we can take to ensure that over time the American public doesn't fall victim to skyrocketing gas prices. That's why I'm pleased to join my colleague, Secretary Chu, today in announcing research projects that are designed to help reduce America's reliance in imported oil.

Last month, the USDA announced 42 National Institute of Food and Agriculture grants focused on new feedstocks, sustainable production, and biorefinery efficiencies. Today, we complement that effort with eight research and development projects funded through the Biomass Research and Development Initiative, which supports the production of biofuels, bioenergy, and high-value biobased products from a variety of biomass sources.

This program has supported the President's goal of reducing our imports of oil by one-third by 2025, and this research supports improved feedstocks and processes which will improve the efficiency of biofuel production and expand it to all corners of the nation.

Today, for example, we're announcing among the eight research grants; $5.6 million in funding for the University of Kansas Center for Research located in Lawrence, Kansas. This funding will be used to demonstrate a new technology that provides and produces diverse products, including advanced fuels, industrial chemicals, and chemical intermediates. Specifically, this project seeks to accelerate the development and commercialization of a portfolio of green technologies to convert biomass-derived feedstocks into value-added products that are currently produced from petroleum. The spectrum of products includes advanced fuels, high-volume industrial chemicals, as well as chemical intermediates.

Commercialization of bioproducts targeted in this project has a phenomenal potential global reach. That global reach in market may be as much as $127 billion a year and help potentially to create 40,000 jobs in direct biorefinery employment. It also has the potential to create an additional 120,000 jobs indirectly through supporting industries in rural areas.

We're also announcing an additional grant of $5.5 million in funding for Cellana, which is located in Hawaii. They will use the resources to help develop a protein supplement for livestock feed using biofuels produced from algae. Now, this project will develop new animal feed and protein supplements that as coproducts of biofuel production allow the entire algae biomass to be used as a high-value sustainable commodity. This project expects to develop the animal feed supplements for swine and poultry.

Projects awarded through this Biomass Research and Development Initiative integrate science and engineering research in the three areas of feedstock development, biofuels and biobased products development, as well as biofuels development analysis. This kind of integration, we think is key, and it certainly encourages a collaborative process and problem-solving approach to strengthening our efforts to speed up the country's ability to produce sustainable biofuels and bioenergy. Ultimately, these investments in clean sustainable transportation fuels will in fact reduce U.S. oil imports, support economic development in Rural America, help to create clean energy jobs for U.S. workers, and protect American families and businesses from future spikes in gas prices.

With that, I'd like to turn it over to my colleague, Secretary Chu, for his announcement from the Department of Energy. Steve?

SECRETARYCHU: Thanks. Thank you, Secretary Vilsack, for your leadership in promoting biofuel development and economic development in Rural America.

To repeat what you said, instead of spending a billion dollars a day to import oil, we should be investing in America's workers, industries, and innovations, and that's why we're announcing the $47 million for research and development projects that would advance homegrown biofuels, create new economic opportunities for rural communities. And this investment is an important part of President Obama's strategy to break our dependence on foreign oil and help protect families and businesses from future oil price spikes.

Over the past decade, scientists and engineers have made remarkable advances in science and biotechnology that are ushering in a revolution in biofuels. The projects we're announcing today will help keep the momentum going. We're funding early stage research into processes, technologies, and feedstocks that will help commercialize advanced biofuels and bring the next generation of clean sustainable transportation fuels online.

For example, we're awarding more than $5 million to Exelus, a small business based in Livingston, New Jersey, to research energy crops that can better withstand drought and stress from salt, and by making feedstocks like switchgrass more robust, we can improve the yield of biomass feedstocks on more marginal lands. The project will also develop a new conversion process for small-scale processing that doesn't require high temperatures or large energy inputs, and this will enable companies to convert biomass to drop in hydrocarbon fuels closer to the farms which has the potential to dramatically reduce cost.

As another example, in Gainesville, the University of Florida has received $5.4 million to improve the sustainability and efficiency of sweet sorghum, a next-generation biofuel stock with enormous potential. Sorghum is drought tolerant. It uses less water than many feedstocks, and it accumulates the sugars that you need to produce the fuels. Researchers in the University of Florida will use genetic mapping to identify genetic traits in sorghum that produce high biomass yields and further increase the usability and effectiveness of sorghum as an energy crop.

And we're also making awards to the Domtar Paper Company in Fort Mill, South Carolina; Metabolix in Cambridge, Massachusetts; the University of Kentucky in Lexington, the U.S. Forest Service in Missoula, Montana. And by developing and commercializing advanced biofuels, we will create a new economic opportunity for rural communities, provide consumers with new options to fuel their vehicles, and reduce our dependence on foreign oil.

Both of you have outlined some of the projects, and you say that they're in the early stage, so at what point will they actually come to fruition where people will be able to fully reap the benefits?

SECRETARYVILSACK: Well, I'll take a crack at that, Susan. I mean, obviously, as Secretary Chu indicated, most of this is early stage research, so it's not something that's going to take place in the near term, this year or perhaps next year. Many of these grants are actually for two- or three- or four-year projects.

This complements what we did and announced last month with NIFA and the 41 grants that we announced that are more advanced in terms of the capacity to see real results, and this in turn is in addition to the money that we're currently investing at USDA and the Department of Energy in both pilot stage and commercial-sized biorefinery efforts. So it's a combination of many steps that we're taking, all designed to produce the clean economy, the clean energy economy the President has talked about.

SECRETARYCHU: Yes. To just to add to that, what Tom said, what these plans are about to do is they take some idea that's been demonstrated in the laboratory, and before you go to really true large-scale deployment, you're going to have to make a little pilot plan, test it, make the product, see what goes before you invest. The next step would be hundreds of millions of dollars in something of scale, and so this is a very important step. For that reason, we can invest in a number of these things. Not all of them will work and really go to commercial scale and profitability without subsidy, but we're hoping that this is laying the seeds.

If a quarter of them, half of them worked well, that would be terrific. We hope they all work well, but this is part of our research and development program.

MODERATOR: All right. We have some callers on the line. We will start out with Amy Harder with National Journal. Amy?

QUESTIONER(National Journal): Hi. Great. Thanks so much for holding this call. There was a House hearing today on alternative fuels, and Members of both parties expressed concern about the slow advancement of advanced biofuels, specifically cellulosic ethanol, and they mentioned the inability and the large hurdle to meet the renewable fuel standard. Can you talk about — you know, you just mentioned how long these projects are going to take to get to commercial scale, but can you talk more about, you know, responding to those concerns that these projects are taking a long time to actually get to commercial scale? Thank you.

SECRETARYVILSACK: Steve, I'll start and then you can add. Well, first of all, I think that there are a number of refineries that are on the cusp of producing cellulosic ethanol. I'm aware of a plan in Iowa. We recently announced the USDA grants for four biorefineries looking at alternative feedstocks ranging from algae to agricultural waste of woody biomass and perennial grasses, so I think it has taken a while, but I think we are going to see an acceleration of production here as we move from concept and idea and pilot-scale operations to larger operations. So I fully expect and anticipate that we're going to see a much faster pace because of the focus that we're putting on this here at USDA and I know the Department of Energy is as well.

SECRETARYCHU: Yeah. I mean, these are significant problems, and we in the Department of Energy in addition to funding research projects like the ones we're talking about, we also have a loan guarantee program, but the issue really is we are trying to get to — you know, this woody biomass from grasses, from lumber residues, from things of that nature, you know, it's a tough technical problem. We know how to do it, but of course, the real issue is how you do it and bringing in a price point that is competitive with fossil fuel, making great strides, but it's a new type of problem that quite frankly, you know, we haven't really had to address.

Previously biofuels have been focused on sugars and starches. It's a totally simpler chemistry. To be frank, it's a 5,000-year-old tradition of converting starches and sugars into bioethanol, so we're into new territory a little bit longer than expected, but on the other hand, we see a lot of great ideas. And the number of new ideas coming out in just the last couple of years actually gives us a great deal of optimism that, as Tom said, this will be accelerating.

MODERATOR: Again, Reporters, if you'd like to ask a question, please let us know by pressing Star/1 on your touchtone pad. We continue with those who are on the line. Jacqui Fatka with Feedstuffs Newspaper.

QUESTIONER(Feedstuffs Newspaper): Good afternoon, gentlemen. Thanks for taking the call. There's a couple proposals in the Senate this week on how to address the ethanol tax credit. Is the administration supporting any of the efforts there on how to handle moving forward with the ethanol tax tariffs and tax credits?

SECRETARYVILSACK: Let me respond to that, first of all, by pointing out that there was a study that was published this week, earlier this week, that suggested that if we didn't have an ethanol industry, if we were relying solely on oil to produce our fuel, we would be seeing gas prices 89 cents, on average, a gallon more expensive.

So it seems to me that there is a need for us to have this industry and to continue to see it expand, and I think it's fair to say that the administration, the President, is not particularly interested in seeing this industry compromised at this point in time by policies that would end abruptly the incentives that are in place today, because we know that when they are ended abruptly, as was the case with the biodiesel tax credit, jobs are lost and production capacity is limited and momentum is lost.

We now have momentum. We now have monies going out to producers to produce the feedstock through the BCAP program. We have commitments for new biorefineries to be built. We have new research projects that are looking at exciting second- and third-generation cellulosic and advanced biofuels. So we're headed in the right direction, and I think it's going to be important for us to continue to send a signal of support for this industry, particularly at a time when Americans are faced with very significant high gas prices. And ethanol basically provides, at least in many parts of the country, a competitively priced and lower produced alternative.

And so our hope is that Congress looks at the various programs, and if for fiscal reasons has to adjust them, does so over a period of time and allows the industry to adapt and allows the industry to direct those resources in a way that provides more convenient supply and increases potentially demand for the product.

MODERATOR: Okay. We continue on the line. We go to Renee Schoof with McClatchy Newspapers. Renee?

QUESTIONER(McClatchy Newspapers): Hi. Thank you very much. I wanted to ask which of the knew biofuel ideas might be the most promising for the military, and also the Navy has some very ambitious plans to get off fossil fuels. Is the science moving fast enough for them to achieve those? Thanks.

SECRETARYVILSACK: We've been in discussions with the Navy and the Department of Energy and others, and I think, first of all, we see a real, a more immediate opportunity with biodiesel in Hawaii, and we're working with officials from the State government, from the Navy, from our Department (USDA), the Department of Energy to see if there are ways in which we can create a process in Hawaii using what's available in Hawaii to produce a biodiesel that the Navy could use.

They do have a very significant commitment to biofuels, and I think it's in large part going to be met by these alternative feedstocks that we're talking about today, looking at ways in which we can expand beyond, you know, a corn-based system to using virtually anything and everything in all four corners of the country.

MODERATOR: We continue —

SECRETARYCHU: Just —

MODERATOR: Oh. You want — go ahead.

SECRETARYCHU: Just a little bit that, you know, the short answer is any technology that's either producing the substitute for diesel fuel or jet fuel is what the military needs. Most of the applications are not blends of ethanol, and those are the projects that would have direct bearing on military needs.

MODERATOR: With that, we continue with callers on the line. Tim Gardner with Reuters.

QUESTIONER(Reuters): Hi. Thanks for holding the call. Somebody mentioned the Grassley bill earlier, brought up yesterday, and that would continue the dollar-one subsidy for cellulosic. Just wondering if you thought maybe that should be increased a bit since the incentives for corn would be significantly reduced in that bill.

SECRETARYVILSACK: Well, I think what's driving this discussion unfortunately is not what's in the long-term best interest of American consumers in terms of choice and affordable transportation fuels but is being driven in part by the fiscal realities we face, and I think we have to take that into consideration.

Having said that, again, I think it is important for Congress to be very careful about how they tinker with these incentives or how they handle them, because if they abruptly end them, that is a job-killing step and it is a momentum-killing step as a time when we really do need to wean ourselves off of our reliance on imported oil, particularly from areas that are unstable politically.

I would point out that we have the capacity in the United States through a variety of diverse efforts, both in terms of oil and natural gas, other energy-producing efforts, renewable energy and the biofuels, to really significantly not only wean ourselves from our dependence but also create potentially hundreds of thousands of job opportunities, and many of them would be located in rural communities. And in a time when we need job growth, I don't know why we'd be considering things that will actually reduce jobs.

MODERATOR: We continue on the line with Kris Bevill with Ethanol Producer Magazine.

QUESTIONER(Ethanol Producer Magazine): Hi. Yes. Thank you. My question is for Secretary Vilsack. I was wondering if you could speak a little bit about the BCAP project area that USDA announced today and explain what significance it holds for the development of advanced biofuels in that area.

SECRETARYVILSACK: Well, we announced payments to Show Me Energy, which is working with producers in a 36-county area that's surrounded — 38-county area — I'm sorry — that's surrounding their facility, enabling that company to work with producers, to pay them for the production of alternative feedstocks, up to 75 percent of initial planning of those feedstocks and creation of those feedstocks, as well as an annual payment for up to 5 additional years in order to encourage the production of grasses in particular that can be used to produce pellets which in turn can be used more conveniently to produce renewable energy and potentially fuel.

So what this does is it indicates a process by which we are diversifying income opportunities. This facility is a cooperatively owned facility, so farmers not only benefit from the production, but they also benefit from the ownership of the co-op, so they benefit in processing. It's a job creator in Missouri, and it creates an opportunity for improved incomes in that 38-county area.

The beauty of this industry is that you need to have many, many, many of those operations just simply because of the bulk and the size and the transportation storage issues associated with these feedstocks, so it really encourages multiple biorefineries, multiple facilities being created throughout the rural parts of this country, and I think that's part of the President's vision. Not only do we get clean energy, not only do consumers get choice, not only do we get utility companies with renewable energy opportunities, but we also create jobs in a place that desperately needs jobs.

MODERATOR: All right. Our last question is going to come from Jenny Mandel with Greenwire. Jenny.

QUESTIONER(Greenwire): Thank you for taking my question. The new proposal on Capitol Hill to tie ethanol subsidies to oil prices at a variable rate, that would have subsidies falling in a higher barrel oil cost. What do each of you gentlemen think as regards to is that an effective and appropriate way to structure those ethanol subsidies?

SECRETARYVILSACK: I think it's going to be important for us to take a look at the various proposals. I don't know that I want to specifically comment about a specific proposal, but what I will say is that this proposal recognizes, as do others that have been proposed, the need for us to sort of work our way towards a day when this industry does not need the support and assistance. That rather than essentially saying on December 31st of this year that's the end and having abrupt end to those incentives and support, jeopardizing job growth and momentum, the Grassley approach and others have suggested that perhaps a wiser approach would be to create a glidepath over time, and there are a variety of ways in which you can do that, and there are a variety of ways in which you can direct those resources in a way that will help this industry continue to grow. And that should really be the notion and part of the debate as opposed to proposals by some who suggest that the time has come for us because of fiscal reasons to stop these incentives when in fact what you'll do is you'll end up killing jobs.

SECRETARYCHU: Let me just add philosophically about these type of proposals. Certainly, as the price of oil goes very, very high, one could think naturally that you may not need as much subsidy, but then there's a flip side to that. If the bottom falls out of the market and the price of oil plunges and you've now just made a lot of investment, what was going to be protecting that investment? And so I agree with Tom, we're not going to comment on any specific ideas. It's good to be thinking about these things.

The bottom line, though, is that we are importing roughly half our oil. That's roughly speaking a billion dollars a day. We would like to see that wealth creation being created in the United States for American citizens rather than money flowing out of the country, and so this is something that Tom and I are very focused on. This is wealth creation in the U.S.

And so, in the long term, prices go up, prices go down, but we need to diversify our energy transportation supplies. That is very clear in the long term.